Offices

After market service is a different game

CAT Logistics and BCI Global organised a seminar in Brussels to take a closer look at after market services. Usually after market service aims at a mix of customer loyalty, turnover maximisation and brand protection (it is important for a high edge brand that its machines are repaired with own brand parts, the right tools and expertise).
"Optimizing after market supply chains means differentiation of the supply chain solutions for each product/market combination", explains Carlo Peters. "You have emergency stocks of a limited number of SKU's very close to the customer to support quick replacement of critical parts and to keep downtime as low as possible. Typically, this service is within 2 hours. Delivering within 8 hours asks for country/regional stocks from which customers can be supplied with spare parts still on a same-day basis. The third solution is delivering within 24 – 48 hours, mainly from centralised locations".
A big challenge within these differentiated set-ups is the allocation of SKUs within the network. In other words: which part will be stored where? This is such a challenge a.o. because of the typical 'long tail' that can be observed when dividing the full parts portfolio into fast running, medium running and slow running products. In spare parts one often sees a very long tail of individual SKUs that show a very limited demand, but which still needs to be available because there is always a chance that a customer needs the part, especially when it is a critical part. Mostly the 'long tail' slow moving products are stored in a central location. In this way total inventory and the risk for obsolescence can be kept low as there is a better inventory visibility and the stock can be held for different markets at the same time.
"Spare parts supply chains are currently being optimized in developed Western markets, but we also see a lot of movement in emerging markets. As sales of finished products in these markets are growing, also the demand for spare parts is growing. And as markets are maturing, typically the customer requirements and expectations become higher and higher. Therefore many companies are now exploring what the best structures are for spare parts supply chains in the major emerging markets like Russia, China, the rest of Asia-Pacific, Middle East and Africa", Carlo Peters observes. Challenges in those markets are a.o. to find the right distribution networks to be able to reach customers in the required lead time, to identify professional and reliable partners, to find ways to prevent very scattered spare parts stocks in those markets (e.g. by setting up regional central warehouses with small local stocks around it), and to keep the networks scalable and flexible as nobody can forecast exactly how the future will look like in those markets.